Concern for family and self - many make various decisions about finances, housing, etc.
Agree about people (especially younger people) who have champagne tastes on beer budget. Young people often use a debit card and do a lot of little purchases every day - IDK if they realize how they can have better financial management and be saving for a home/townhouse/condo purchase.
The beginning of 2021 had me fearful - a number of factors, fearful about our 401k.
Now 2022 as it is going, has me nervous. Not fearful. Just trying to figure out how to move forward on sheltering 401k funds - and when to shelter the 401k funds (into guaranteed very low interest until everything settles down). Jan 2022 our 401k went down 9.82% and YTD as of last Thursday was down 12.14%, and the most hit was in our two growth funds - large cap and small cap. Meeting with financial guy (Don), and they have sheltered some of the funds already that they manage (and manage for us).
I didnât ask about what our RMD will be when we are 72 (we are 65 now) â am inquiring back to Don with more of our tax information and our yearly required income/sources for 2022 - based on our last few years - and drawing off of some of the retirement funds he suggests. Turning on DHâs Social Security (since that is taxed low); our gains will be better with our investments; and questions about what will happen with social security in the future.
I do think we are going to use funds from RMD on home improvements when the time comes.
Our fund flow now is based on our needs and also considering DDs.
DH and I got into our first purchased home 14 months after we graduated college - on our own (no parental money or inheritance). We had paid off DHâs relatively low student loan (living on one income and paid off quickly the loan, plus built up some money for house down payment), and assumed a mortgage and took on a 2nd mortgage at prime and had the 2nd mortgage paid off when we took a company move (which paid our real estate costs) less than a year later. The wedding money paid for washer/dryer and refrigerator in the first purchased home.
Between the culture and what DDs have been doing - only one is in position to purchase a home in her location as her long term career will be there. When I make a trip later this year, we can at least scope out the housing areas with a real estate friend of mine there. It may be a while for her, but we also may be putting money into a fund for each DD (gift money to each of DDs).
Since DH is just now taking SS (he turned 65 last June and I turned 65 last Oct), I could see âfor realâ if my decision was correct - and it was in our situation. I began taking SS right when I turned 65 - I worked 5 years âsunset careerâ and boosted my SS earnings to be better than taking off spousal. So we just turned on DHâs SS - and I am receiving $140 more per month than I would off of spousal benefit.
I kind of repeated myself a bit on this post, but obviously crunching numbers for needs this year, and redirecting some of my thinking on timing on home improvements.
Now âcrunchingâ some numbers with our financial advisor Don about what kind of withdrawals we will have with RMD off of IRA/401k - I believe we will not do some of the home improvements until then - using that extra money towards things we want to do for selling the house - to get top dollar with spruced up kitchen, extra sq footage with 4 season room off the family room (terrific back yard and wooded view), and two car carport designed for the home (when we cross that bridge for DH not wanting to live here anymore).
I need to tell Don how much operating money we want to draw off our investments every month. Income from SS and a monthly draw off of investments. Last year I drew off of 401k.
We are in our mid-40s. We live in a VHCOL area our mortgage is high. We max out 401k and 457b, IRAs, and I pay 11% into my government pension, which is COLA and at my current salary should get me $3k a month. We both pay into SS, but I donât have enough credits yet. We have $850k in retirement savings, which is not the right multiplier of our income per all the formulas. I didnât work for 10 years (grad school, stayed home with kids), so my income is new. I work for a public agency and like the security and benefits: we can keep my health benefits before Medicare kicks in. Honestly, I have no idea how much we need to retire. Iâd like to have DH stop working at 60.
We are 4 and 9 years away from college and are struggling to do all the things, which I admit is a good problem to have. Weâre prepaying the mortgage, saving for college, and increasing vacations (partly because pandemic and partly because our kids can handle big vacations now). My own father died before retirement, due to lifestyle (smoking), so I donât think Iâll die before retirement, but I never say never. I feel like we could be doing more to retirement (because I also read Bogleheads), but I like to travel and it helps me enjoy work when I can think of my next vacation.
I worry that the last years of the stock market gains are going to drop or stay flat. Growth has really helped our finances and (this sounds so privileged) it is going to suck working just as hard and seeing less return, if that happens. As a Gen Xer, I feel like weâve done well with some lifeâs struggles: DH was early in his career when the dot com bubble burst and we were well positioned to buy our home when the housing market collapsed. I feel like our luck will run out at some point because I grew up working class and was always just waiting for the other shoe to drop.
The income multiplier by age rules donât work unless your income is steady over the years. An increase throws it way off. You seem on track to me if aiming to retire around 60-65 and saving for college separately. Iâm fully on board with enjoying life while saving some for retirement. Balance is important because retirement is not promised to anyone.
Estimating this needs to be based on spending, not a multiplier of income. Based on retirement spending, you can then estimate what amount of assets at what level of investment return will be needed for providing retirement spending money (a) allowing for depletion of assets over the high end of your life expectancy, or (b) without depletion of assets.
Consider your current level of spending, but adjust it for how it is likely to change in retirement:
Medical costs generally increase at higher ages. But a big factor is often going from employer-subsidized insurance to full pay on your own if retiring before Medicare age. Once on Medicare, there are also premiums and optional additional coverage costs.
If the kids will be on their own by then, their expenses will be gone.
Expenses relating to work (e.g. commuting, clothing if dressy in-person work) will go away.
Costs of activities you may increase doing in retirement (e.g. travel) will increase.
If you will have a paid for house by then, the mortgage (but not property tax or homeowner insurance) costs go away. But if you rent, there is the uncertainty of rent increases.
If you want to move elsewhere for retirement, consider cost differences (which are often mostly in housing).
The VHCOL is the spin that has our stories differ (and DH and I are older and now retired) - and we had one income since children were 3 & 5 until age 60 and re-entry to job market was at lower pay and less than FT hours for 5 years (and re-entry was also after successfully battling aggressive stage III cancer). DH grew up really in somewhat more working class family situation (although with a thread of higher education honored/respected) and my father had the drive and ability to do well with his own business (but also died young due to smoking effects 20 years after he quit - died at 64).
Certainly college selection/costs can very depending on what is selected and opportunities for merit scholarships. If student takes longer to totally launch (due to graduate or professional school and parental assistance) - those factors/decisions on college spending can also come into play when reviewing final nest egg as one gets close to retirement.
Budgeting vacation costs seems feasible with dual incomes.
When you get closer to age 60, you can end up seeing where your children end up living and what your total financial picture is at that time. If you decide to live in a lower COL place and are able to âdownsizeâ in cost of RE and taxes/COL.
I would not worry about your SS because if your spousal benefit is higher, you would go with that number - but also there are unknowns on how SS will be funded and if it will run the way it is now.
However if your DH does retire at 60, it is having the cash flow off the investments for the years where maybe his and your salaries are at their highest. Because of some company bonuses and stock options, DH had a few extra bumps in income 2013, 2015, 2018, and 2019 (and would have been 2020 but he stopped working before the end of the year).
Like you, the current state of our losses in 401k due to the stock market situation/downward trending - the unknowns and the factors entering in giving us a bit of heartburn and challenging our nerves.
The unknowns! I say just continue hanging in with the good things you are doing financially and making the modifications necessary as situations require.
The things you can do well is attention to kids/family unit and helping guide the children with continuing good choices in life and seeking out careers where they can support themselves. Then if they have a SO down the road, the hope is that the SO also has made good choices in life. Right now SIL and DD2âs BF are struggling - underemployed and finding their way. DD1/SIL have 3 young children.
Returning briefly to the Dave Ramsey/mortgage issue - I was thinking that he suggested that folks have a paid off home before retiring (just so youâll have greater security w/the roof over your head). I know heâs fine w/mortgages when buying a house earlier on.
Thatâs why I was picturing selling our current house and using proceeds (houses have doubled in value in our neighborhood since we purchased) to buy a more modest place for the pre-retirement/retirement yearsâŠ
It all dependsâŠour current low interest mortgage was about to be paid off and we just took out a 10 year low interest mortgage on a portion of the home value. We think we will be here for another 10 years and the payments are small based on our nest egg.
I think people with a small nest egg do have to be very careful with their spending.
I have had friends looking to âdownsizeâ in our current home area, and it is cheaper for them to stay put in their larger home. I think if you choose to move away at retirement, that is a separate issue. But IMHO after retiring, look around carefully and then place your home at a peak time for buyers to be purchasing (many look around March into spring as they may want to relocate based on school schedule/summer move). You want to capture the best price - and knowing what buyers are willing to pay for your home â listing it with a very seasoned RE agent who can help you on this â and also maybe setting what you want to walk away with, money wise with the RE transaction.
I would be upset if I lived in a state that doesnât tax pensions but does tax 401k/IRA withdrawals. Retirement income is retirement income, and it seems unfair to me to give one type a break but not any others. My state is talking about giving retirees a tax break, and if it happens, I will lose it if ends up being pensions only.
I believe my state doesnât tax military, federal or state pensions - and of course those under the rail road rules follow those rules.
We got a taste of our state income taxes as retirees for 2021. It is a balancing act of other costs - and keeping our home longer here based on DHâs hobby/volunteer activity. We are in a growing area and our home value IMHO will continue to go up.
A friend moved to a state not far from her son/grandchildren - where their military pension is not taxed. But they have other costs there. The main factors were the grandchildren and not taxing the military pension - they found a nice affordable place (better than average) that fit what they like to do and they feel comfortable. They had to consider carefully as the military paid for this one last move.
On RMDs - there is a new Uniform Life Table for Calculating RMDs which takes effect 1-1-2022. Our FA had a download from Rise Private Wealth Advisors www.riseprivate.com â he sent us a PDF of the chart. This chart starts showing age 70 and each year from there.
He also stated âThe table changed this year to a tax law change that occurred 1/1/2020. According to the chart, the valid number for 72 now in 2022 is 27.4. I prefer to use the cash flow chart in Emoney under âplanned distributionâ as it projects the asset value and then applies the correct divisor.â
In CT, a portion of CT teachers retirement benefits are not taxed. It is not the full amount, just a fraction. I think itâs 25% still but bumping up to 50%. Teachers in this state are subject to the offset and windfall provisions related to SSâŠso even if eligible for SS, the benefit is reduced by about 2/3. (My SS benefit is about $275 a monthâŠ.without offset and windfall, it would be over $600).
I think this is reasonableâŠeven though other retirees are taxed on full pension amounts.
Never understood why IRS uses a divisor instead of the corresponding percent (27.4 = 3.65%), which I think would be easier for most folks to understand. âOh, my first year of RMD, I need to take a little less than 4% out.â
Same with âquarterlyâ estimated tax due dates. They are not spread evenly through the year. But it makes certain calculations use divisors that donât have more than one digit after the decimal point.
Itâs like they think people donât have calculators and are doing everything by hand or something.
In your case, I understand it. But Michigan teachers donât have anything like that, and there is no logical reason to give a tax break for any particular group of retirees in our state. It just makes no sense. Even if the legislation to exclude tax on retirement income passes, there will still be tax on some of it ⊠but hopefully, the break will be applied equally.
Of course, it is all descended from a time when people did everything by handâŠ
Of course, lobbying by tax preparation software companies ensures that the IRS cannot provide its own tax calculation software (that it certainly uses to verify returns) to the general public.
I follow this thread as we are looking at retirement in 4-7 years, and are in solid shape. One question about tax prep software â is turbo tax sufficient or is there a better software to handle capital gains through our investment account? Weâd had our taxes prepared for us for a while because of some complicated matters lingering long after the mess left after my mother-in-lawâs death. All that was finally resolved and we started using turbo tax since all we have is salary, standard deductions, plus capital gains and losses from one investment account managed by our financial advisor. Turbo tax pulls the info directly from our investment account. Are there other tax programs which we should consider instead?